How Kenya is Viewed by Major Chinese Investors
According to the survey corruption is the key barrier, with 68 per cent of Chinese companies labelling it ‘a very significant obstacle’; crime, theft, disorder, and safety concerns are the second biggest challenges at 63 per cent, and obtaining work permi
As Africa’s single largest trading partner, financier of infrastructure development, investor in African economies and lender to many countries, China is concerned about the business and investment climate in Kenya.
The first ever Kenya-China Business Perception index says the government needs to invest more in energy, improve water supply, ease of access to land and cut down red tape to attract and retain foreign investments.
It also says corruption, crime and safety are key challenges that face businesses operating in the country and hamper the productivity and growth of investments.
The observations were made at the first Kenya-China Business Perception Index (BPI) 2014 survey launched in Nairobi last month. It was carried out by Sino Africa Centre of Excellence (SACE) Foundation between February and June 2014. It sought to understand the characteristics of Kenyan-based Chinese enterprises, the problems and obstacles they face in doing business in the country, and the kind of policy support they need.
The launch brought together
policy makers, leading Chinese and Kenyan companies which discussed Chinese investment activities in Africa, and how the research can create a model that would be beneficial to other African countries.
The four main categories that were covered in the BPI survey included the legal environment, workforce, operational facilities and the socio-political environment. A total of 75 Chinese entities in the country took part in the survey.
As Africa’s single largest trading partner, financier of infrastructure development, investor in African economies and lender to many African countries, China is concerned about the business and investment climate its enterprises operate under in Kenya.
“Most Kenyan-based Chinese companies experience harassment from local government functionaries. They are anxious about the socio-political environment in the country,” noted Mr Jinghao Lu, the SACE Foundation Head of Business Development.
He noted, “It is important to note that safety issues, according to the survey, are also a major concern with many Chinese companies being susceptible to theft, robbery, vandalism and on-site arson compared to other companies in Kenya.”
The BPI report shows that corruption is the key barrier, with 68 per cent of Chinese companies surveyed labelling it ‘a very significant obstacle’. Further, crime, theft and disorder, and safety concerns are named the second biggest challenge at 63 per cent, with obtaining work permits coming in third at 42 per cent.
"...To alleviate Chinese companies’ situation regarding ha- rassment from local government functionaries, the following policy support can be provided; Chinese companies’ awareness against bribery should be improved and detailed information on business-related regulations and rules should be also disclosed and disseminated; more trainings on Kenyan laws and regulations would help Chinese companies better identify their own flaws and wrongful accusation from government officials; and informal channels for information dissemination can also help advise Chinese companies on proper conduct in terms of tax, labour administration, and intellectual property, etc..." the report reads in part.
But Mr David Mugambi of Kenya Investment Authority says that despite the report perceiving Kenya to be corrupt, with a list of various organisations named, investors should use the Authority by reporting any issues that affect their investments. He adds that the Authority is aware of the energy, water and land concerns and is lobbying the government on a policy level for action.
Some of the institutions named in the report that are said to perpetuate the above obstacles include the Kenya Revenue Authority (KRA), Nairobi City County and the traffic police.
The survey is now concerned with identifying gaps in order to create a model that can be used in other African markets. According to Jinghao, the SACE Foundation is in the process of looking for more funds to conduct index surveys in other African countries.
The second stage which began in mid-2014 is set to be completed in 2015 with Angola, Ghana, Nigeria, Tanzania and South Africa under immediate focus
The four main categories that were covered in the BPI survey included the legal environment, workforce, operational facilities and the socio-political environment
THE TEAM: SACE Foundation founder, Mr Isaac Kwaku Fokuo Jr. (3rd right) with the SACE Foundation team pose for a photo with the KenInvest Senior Investment Promotion Officer, Mr David Mugambi (left) and Mr Edwin Macharia, a partner at Dalberg Global Development Advisors (3rd left) during the BPI launch
DISCUSSION: Mr Jinghao Lu, SACE Foundation Head of Business Development addressing participants at the BPI launch in Nairobi